Which of the following best describes the cause-effect chain of an expansionary

Question

Which of the following best describes the cause-effect chain of an expansionary monetary policy?
A. A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.
B. A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
C. An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
D. An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

Explanation / Answer

D. Because expansionary monetary policy adopted by the government when there is low money supply in the market. Basically to boost the purchasing power of the natives so the investment increases which also boost economy.

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